Futures weak; cash steady to higher

CME cattle futures attempt at early strength faded quickly and a trip back to recent lows in some contracts has ensued. Most active Aug LC once again tested the $114 area, a critical point on the spot weekly chart too. So far, it’s held.

This weakness despite expectations cash fed cattle prices this week will trade at no worse than steady as packers replenish inventory, spurred by continued large profitable margins and fed kills above 500k. Negotiated trade volumes have been sub-100,000 head for 6 out of the last 8 weeks while kills fed kills have mostly been 500k or higher. Obviously, packers have been able to rely on more formula cattle, but given expectations that fed kills will stay above 500k per week the next 3 weeks, negotiated trade volumes may very well pick up some, lending some stability to a fed cash cattle market that has dropped $26 in the last 9 weeks to levels not seen since January 2017.

Monday’s USDA Comprehensive Cutout report showed a modest volume increase from the prior week in spot, +22 day out-front sales and exports.  Lower cutout values appear to have generated some buying interest and there are reasonable expectations that this week will see the same. Granted the volume isn’t as good as earlier in 2017 and the dog days are here but the volume improvement indicates consumers are still picking up beef.

Source: The Beef Read